A staggering new report by the Institute for Fiscal Studies (IFS) reveals the full extent of the damage done by six-years of Conservative policies – and it also poses worrying questions for the future.
Entitled “Living Standards, Poverty and Inequality in the UK: 2016”, the report assesses the changes to average incomes, wage inequality and poverty for 2014-15, and then compares them with data from the past 50 years. And it does not make for pretty reading.
Not everything is quite as it seems
To begin with, the IFS explored where the poorest in society get their money from. It found that 20 years ago only a third of families relied on work as their main source of income (the rest being made up with benefits, support from families etc). That has now changed to around half. As the IFS states, this may appear “good news” on the surface, but:
it does mean that the poorest are now more vulnerable to any downturn in the labour market than they would have been in the past.
In layman’s terms, if the UK were to dive into a recession again (which many commentators are already pointing towards), it would be the poorest immediately hit, by job losses.
Furthermore, there was another aspect which, while on the surface could be perceived as positive, actually had worrying undertones.
Income inequality – that is, the difference between the highest and lowest earners – has fallen. Between 2011 and 2015, the top earners saw a fall of 1.2% in their average incomes, while the bottom 10% actually saw an increase of 4.4%.
But, the devil is in the detail. The report shows that not only were the poorest having to work more hours for their money, but the increase was also due to more households having two people working. And while the number of work-less households has fallen, this hasn’t led to a reduction in child poverty. In fact, more children are in poverty-stricken working households than ever before.
The return of the “squeezed middle”?
What’s most interesting about the report, however, is the effect that Conservative policies have had on the “middle classes”.
The findings show that half of these households now rent homes, rather than buying – and while poorer families now have to rely on less welfare, those in the middle have seen an increase, from 22% in 1995 to 30% of people who now receive some form of benefits.
But ultimately, the report paints a grim picture for how much money we are all earning.
Average incomes are now only 1% above their peak before the 2008 financial crash and only 2% better than over a decade ago. And while the employment rate has risen to its highest levels ever, people’s average income has not kept pace, as this graph shows:
Furthermore, the wages of young people aged 16-24 are 7% below their pre-crash peak, showing that for this age group, no advances have been made regarding income inequality.
What’s critical with this report is not to view it as a singular entity – but to juxtapose it with other evidence against Conservative policy decisions that has come out this year.
Violating international law: the Conservative way
As The Canary reported in June, the United Nations (UN) released a damning report revealing the effect that Conservative policy has had on the most vulnerable in society.
The investigation by the UN Human Rights committee on economic, social and cultural affairs contained overarching criticisms, covering nearly every area of government policy.
The UN heaped disdain upon the Conservative government over:
the number of self-employed, part-time and zero hours contracts jobs, and the effect on marginalised people.
the housing crisis in the UK, including the lack of social housing, sky-high rental prices and rogue landlords.
the “exceptionally high” levels of homelessness and the Conservatives’ inadequate response to this.
the government’s record on education and failure to address inequality affecting pupils’ attainment levels.
a failure to address food poverty and the heavy reliance by millions on food banks.
the rising levels of poverty among marginalised groups, and the government’s failure to tackle child poverty.
However, the strongest language was reserved for Conservative austerity measures. With criticism that was only matched by that for Honduras – a country with one of the highest murder rates in the world, and one which is subject to tourist travel warnings from both the US and the UK – the UN said:
the Committee is seriously concerned about the disproportionate adverse impact that austerity measures, introduced since 2010, are having on […] disadvantaged and marginalised individuals and groups. The Committee is concerned that the State party has not undertaken a comprehensive assessment of the cumulative impact of such measures […] in a way that is recognised by civil society and national independent monitoring mechanisms.
Its most stark recommendation was that the government should reverse all cuts to benefits that have been introduced since 2010. The likelihood of this government, or any future one for that matter, adopting the UN’s rulings is slim to say the least. But it is sorely needed.
You cannot escape the responsibility of tomorrow, by evading it today
On top of the UN’s conclusions, the IFS also released another report in March of this year – into present and future rates of child poverty.
Its conclusions were troubling. The IFS forecast that child poverty rates are expected to rise between 2015-16 and 2020-21: by 3% for absolute poverty and 8% for relative poverty. This means that 18.3% of children will be living in the most deprived of conditions measurable by 2020. It also stated that families on low incomes with three or more children are going to feel the brunt of the Tories’ proposed cuts to benefits.
Translated into people, rather than just a statistic on a page, this means that 2.6m children will be in absolute poverty in four years time. A shameful figure for one of the richest countries on the planet.
The “new poor” tend to live in households where there is someone in work. Only a third of children below the government’s absolute poverty line now live in a workless household – two thirds of those classified as poor are poor despite the fact that at least one of their parents is in work. So if the new prime minister takes forward the ‘life chances’ strategy started by her predecessor, that strategy needs to focus on lifting the incomes of working households.
Theresa May said in her first cabinet meeting on Tuesday that:
Politics isn’t a game. The decisions that we take around the table affect people’s day to day lives in this country. And we have the challenge of Brexit, and Brexit does mean that, by forging a new role for the United Kingdom in the world. But we won’t be a government that is defined just by Brexit. We will also be a government defined by the social reform that we undertake.
If her brand of “social reform” is anything like her predecessor’s, then the warnings from both the IFS and the UN should be heeded.
Because May’s brand of “social reform” may just turn into an all-out “class war”.
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